If you work for a marketing company, you’ll understand the importance of maintaining high standards to keep your clients happy. Things don’t always go to plan however, and this is why professional indemnity insurance comes in handy. Should a client take issue with the work your organisation has done for them, your business can be protected by any claims brought against it.
Business insurance has become increasingly important over the past few years in line with the ever-growing compensation culture, with the Confederation of British Industry one of the organisations to criticise the “have-a-go” mentality that many UK companies have faced.
A survey conducted by Lloyds in 2008 found that half of business leaders are concerned over the emergence of US-style compensation culture, which has the potential to seriously affect companies’ finances. Some 183 board level executives were polled, of which 50 per cent said they felt more vulnerable to the threats of direct litigation than they did as recently as 2005.
It was also revealed that 58 per cent of respondents were using lawyers more frequently than before, while approximately a third of companies had become less likely to take a risk and invest in new business ventures – primarily because they were concerned about direct legal action.
Instead of dealing with problems that already exist, the report recommended, businesses should focus on dealing with any future issues that may arise – something that business insurance can help protect against. Professional indemnity insurance, which is also known as PI insurance and indemnity insurance, is particularly useful if your organisation has to pay to rectify a mistake or cover any legal costs incurred due to professional negligence, such as making a work-related mistake or giving incorrect advice.
How do you know whether professional indemnity insurance is right for your organisation? Well, it’s worth considering if you regularly give advice to your clients. Are you willing to take the risk of one day giving the incorrect advice and your client taking legal action? If you handle data belonging to a client or a business, are responsible for a client’s intellectual property or provide a professional service that can be challenged, it may also be useful.
Even if you feel confident in your work, small businesses in particular can be exposed to claims of negligence if a client’s professional expectations are not met – something that could be of serious financial detriment.
The compensation culture isn’t limited to claims from clients, however. Any small business will understand the importance of looking after its staff, and this extends to meeting health and safety requirements to ensure that risks are minimised to employees. Depending on what industry you are employed in, an injury at work may be more likely than if you were sat behind a desk.
Thankfully, deaths and serious injuries in the workplace have declined markedly over the past three decades. In 2009, 180 people in the UK died at work. In 1974, this figure stood at 651. According to the Health and Safety Executive, 151 workers were killed between April 1st last year and March 31st this – a record low and 27 fewer than the total recorded for the same period 12 months previously. While progress has clearly been made, there is still plenty more work to be done. Not only is it absolutely vital for a business’s employees to be safe while at work, companies who do not implement adequate health and safety measures risk losing a lot of money through being sued.
For this reason, small businesses are obliged to take out employers’ liability insurance, something that has now become a legal requirement in Britain. In most instances, this will provide cover of at least £5 million in the event of injury or illness to employees. Why is it so important? Well, it only takes a moment’s thought to consider how easy it is for an employee to suffer an injury. While construction and engineering have obvious hazards, something as trivial as tripping over a computer cable in the office can trigger an employers’ liability claim.
Perhaps you’ve recently set up your own small business. Remember to take out employers’ liability insurance if your business requires you to employ people. Who should you take out an insurance policy with? It’s vital to use an authorised insurer, and a list of these can be found on the Financial Services Authority’s website.
Not every small business needs this type of insurance, however. If you have no employees, are a family-run business or are closely related to your staff, then it isn’t necessary. Public organisations, such as government departments or bodies of the NHS, are also exempt.
Have you ever been in a client meeting and spilt a drink over their computer? Accidents such as these, despite being trivial, can trigger a compensation claim against your business. And with mishaps all too common, it is important that small companies considerpublic liability insurance. Just about anyone who experiences an accident as a result of something your business or one of its employees has done can issue a claim, but fortunately public liability insurance can help protect your business financially in the event of getting sued.
Not only will this type of insurance cover any awards of damages, it will also cover any legal fees, costs or expenses that are incurred. If the person making the claim has been injured, the NHS is perfectly entitled to claim any costs – from ambulances to hospital treatment – from your business.
Public liability insurance isn’t always straightforward. It is important for small business owners to speak to a professional in order for them to understand the conditions, warranties and exclusions that apply. It’s also worth bearing in mind that any insurance provider should be registered with the British Insurance Brokers’ Association. While public liability insurance is generally optional, horse riding establishments are required to take out a policy.
If you already run a small business or are thinking about setting one up, it is vitally important to take out the appropriate business insurance. Not only will you be afforded peace of mind, you may also save your organisation money should something unforeseen occur.